Philippine Inflation drops to 1.3% for May

The Philippine Statistics Authority (PSA) [link] revealed the year-on-year increase in the Consumer Price Index (CPI) for May was just 1.3%, down from the 1.4% y/y recorded in April. It was the lowest monthly price increase since the 1.2% y/y increase recorded for November 2019. The PSA said that the year-to-date inflation rate was at 1.9%, which is below the administration’s targeted 2% to 4% range. The BSP predicted that May’s inflation print would come in between 0.9% and 1.7%.

> BSP response:  The BSP called this a “manageable inflation environment” with “continued easing of commodity price pressures”. The BSP said that it would “reassess its monetary policy stance at the next meeting of the Monetary Board on 19 June 2025.” Previously, BSP Governor Eli Remolona said that there’s “room” for two cuts in 2025.

> The peso:  The Philippine Peso has been performing relatively well relative to the US Dollar, which some analysts think may give the BSP the ability to cut rates this June, even if the US Federal Reserve elects to pause. Normally, the BSP cutting rates faster than the Fed could degrade the value of the peso relative to the dollar, but the peso’s relative strength could give the BSP the ability to make a cut without pushing the exchange rate into psychologically-challenging territory.

  MB BOTTOM-LINE:  Martin Romualdez, the Speaker of the House and cousin to President Marcos, implied that a slower increase in the price of goods was somehow “relief” that regular people would “feel”. I disagree. Prices still went up. The rate of their increase is down, but prices are still at or near all-time highs, and the fact that prices didn’t suddenly jump even more than we thought isn’t relief. I don’t really “feel” prices not continuing to set all-time highs. People would definitely feel if, for example, the BSP aggressively cut rates to reduce their borrowing costs on loans taken out before the inflation crisis hit.

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